Paper's_Paper - Papers Paper Paper owns a local newspaper...

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Paper’s Paper Paper owns a local newspaper that operates inside the city of Vancouver. He has been in the business for 22 years and expects to retire in about six years and sell his company. He is currently deciding whether or not to expand to cover Burnaby, Surrey, Richmond, and North Vancouver. His cost of capital is 8%. In order to accommodate the additional cities, he will require additional machinery. For Burnaby and Surrey, Machine BS would cost $200,000 and would last 6 years with no salvage value. A similar machine purchased for (and in) Richmond would cost about $70,000 due to advanced technology, and would have a salvage value of $30,000. For North Vancouver, he has two options. Machine Green can be purchased for $120,000 with a salvage value of $25,000 at the end of 3 years. After this period, a new machine could be repurchased for the same price, but would have no salvage due to a lack of demand. Alternatively, a competing newspaper has mentioned that they have additional
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This note was uploaded on 02/19/2011 for the course COMM 298 taught by Professor Freedman during the Spring '09 term at The University of British Columbia.

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